Indices enable traders and investors to gain exposure to an entire economy through a single trade. They can also be traded in both directions, meaning it’s possible to profit from both upward and downward price movements. The aim of stock indices is to provide an accurate and efficient way for investors to reliably compare current stock market prices with past stock market prices. Indices can be used to measure overall stock market performance and can also be used to benchmark an investor’s performance.
Indices trading is popular for a number of reasons. Not only do indices provide plenty of trading opportunities but you can also trade them in both directions using contracts for difference (CFDs).
The Best Indices to Trade
SOME OF THE MOST POPULAR INDICES AMONG TRADERS INCLUDE: 1. The Dow Jones Industrial Average (DJ30): Launched in 1885, the Dow Jones is one of the oldest stock indices in the world. It comprises 30 large publicly-owned companies in the US. Stocks in the index include the likes of Microsoft, Walmart, and Johnson & Johnson. 2. The S&P 500(SPX500): The S&P 500 is a broad index that tracks the performance of 500 large-cap companies listed in the US. A widely followed index, is generally seen as a broad representation of the US stock market. Stocks in the index include the likes of Apple, Mastercard, Walt Disney, and PepsiCo. 3. The NASDAQ 100 (NSDQ100): This is a technology-focused index that tracks the 100 largest non-financial companies listed on the NASDAQ exchange. Well-known companies in this index include Amazon, Facebook, Alphabet (Google), and Netflix. 4. The FTSE 100 (UK100): The FTSE 100 is a collection of 100 large-cap stocks listed on the London Stock Exchange. Constituents include Royal Dutch Shell, HSBC Holdings, Unilever, and GlaxoSmithKline. While the FTSE 100 is generally seen as the UK’s main stock index, it’s worth noting that the majority of companies within the index are multinationals that generate revenues outside the UK. This means that the index does not really represent the UK economy. 5. The DAX 30(GER30): This index tracks 30 major German companies trading on the Frankfurt Stock Exchange. It is generally considered to be a barometer of the German economy. Constituents include Siemens, Adidas, and Volkswagen. 6. The Nikkei 225 (JPN225): The Nikkei 225 is Japan’s premier stock market index. It contains 225 companies listed on the Tokyo Stock Exchange. Companies within the index include prominent Japanese brands such as Sony, Toyota, and Panasonic. 7. The ASX 200(AUS200): The ASX200 is Australia’s blue-chip stock index. It tracks 200 companies, which combined, represent about 80% of Australia’s total stock market capitalization. Companies in the ASX200 include the likes of National Australia Bank, Qantas Airways, and Rio Tinto.